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CA: The Absolute Attorney Client Privilege

Costco Warehouse v. Greg Randall (2009 CAL LEXIS 12375) (pdf)

Decided Nov. 30, 2009.

CA: Attorney Client Privilege

FACTS: In June of 2000, Costco retained Sheppard, Mullin, Richter & Hampton to provide legal advice regarding whether certain warehouse managers in California were exempt from California wage and overtime laws. One of Sheppard’s wage and hour law attorneys interviewed warehouse managers and produced a 22-page opinion letter on the issue. Costco, the interviewed managers and the lawyer all testified that they understood the communications between the managers and Hensley were, and would remain, confidential.
Several years later, a group of Costco employees filed a class-action suit against Costco alleging that between 1999 and 2001, Costco had misclassified some of its managers as ‘exempt’ and had therefore failed to pay overtime wages. In the course of the litigation, Costco employees sought to compel discovery of the lawyer’s opinion letter. Costco objected on grounds that the letter was subject to the attorney-client privilege and the attorney work product doctrine. Plaintiffs argued that the letter contained unprivileged information and that Costco had waived the privilege by placing the contents of the letter in issue.

RULING: Overruling the intermediate appellate court, the California Supreme Court reiterated California’s strong policy in favor of maintaining client confidences and secrets.

1. In Costco, after finding that an attorney-client privilege existed by virtue of an opinion letter written by independent counsel who had interviewed and taken witness statements from company employees, the Supreme Court found the entire letter, including the witness statement summaries, to be privileged.

2. Additionally, the majority ruled that, while the court can require an in camera hearing to determine whether the relationship constituted an attorney-client relationship, there is no authority for allowing the court to require in camera disclosure of the communications themselves. Those communications are privileged from disclosure, even in camera. If “ the dominant purpose” of the relationship was to provide legal advice from lawyer to client, no disclosure of communications is permitted.

3. Additionally, the Supreme Court held that it was not necessary to demonstrate any harm resulting from the disclosure; the intrusion into the attorney-client relationship was deemed to be harm in itself.

‘[T]he privilege is absolute and disclosure may not be ordered, without regard to relevance, necessity or pany particular circumstance peculiar to the case.’

LESSON: From a legal malpractice point of view, it is crucially important to maintain client confidences, even in the face of a judicial order to reveal confidential material in camera. At least in California, it has long been held that a lawyer has a duty to preserve client secrets and confidences, even in the face of a contempt citation. See, In Re Navarro, 93 Cal. App. 3d 325,330 (pdf). 

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Posted in: California, Duties: Confidentiality, Fiduciary Duty, Litigation